Singapore takes significant measures to strengthen its international tax cooperation

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Currently, Singapore may provide assistance to foreign jurisdictions under its income tax treaties (treaties) which incorporate the internationally agreed OECD Standard for the effective Exchange of Information (EOI) through treaties (EOI Standard).1 To-date, Singapore has incorporated the EOI Standard in 40 of its treaties and signed one Tax Information Exchange Agreement with Bermuda.

Since the adoption of the EOI Standard in March 2009,2 Singapore continues to take progressive steps to improve its EOI framework. Besides introducing measures to ensure that Singapore's financial system is not used to harbor illegitimate funds or as a conduit for the flow of undeclared assets, effective 1 July 2013, Singapore will criminalize the laundering of proceeds from serious tax offenses. Four key steps were announced in May 2013 to further strengthen its current EOI framework.

Extend EOI assistance to all of Singapore's existing treaty partners

This new measure will extend the EOI Standard to all existing treaty partners, subject to reciprocity, without the need to amend and update individual treaties to incorporate the EOI Standard.

Sign the Convention on Mutual Administrative Assistance in Tax Matters

On 29 May 2013, Singapore signed the Convention3 which is promoted as an international agreement for bilateral tax cooperation among the Convention's signatories. This will expand Singapore's network of EOI partners by 13 new jurisdictions (including Brazil and the US).

Allow the Inland Revenue Authority of Singapore (IRAS) to obtain bank and trust information from financial institutions without the need for a court order

This move is meant to further streamline the administration of EOI under the EOI Standard and allow the IRAS to respond to an EOI request for bank and trust information without having to seek a court order. The IRAS has indicated that it will not undermine the basic safeguards to taxpayers and will continue to assess whether the requests are in line with the EOI Standard before acceding to them. Taxpayers will still have the right of appeal against the IRAS' decisions.

By entering into a Model 1 IGA with the US, it will facilitate financial institutions in Singapore in their compliance with the FATCA without the need for financial institutions to enter into agreements with the US Internal Revenue Service (IRS) individually.

The Model 1 IGA establishes a framework of reporting account information of US persons by financial institutions outside of the US to the relevant domestic authority which in turn provides the information to the IRS.

The necessary amendments to the Singapore Income Tax Act to effect the above changes are expected to be made before the end of this year.

Endnotes

1. Essentially, the EOI Standard enhances the scope of information exchange with treaty partners by lifting the domestic interest condition and allowing for access of information from banks and trust companies under certain conditions as well as allowing exchange of information for other taxes in addition to income tax.

3. The Convention is a multilateral agreement originally drawn up by the OECD and the Council of Europe to enable each Party to the Convention to combat international tax evasion and better enforce its national tax laws, while respecting the rights of taxpayers. The scope of the Convention covers a wide range of taxes and goes beyond exchange of information on request. It provides for other forms of assistance such as spontaneous exchanges of information, simultaneous examinations, performance of tax examinations abroad, service of documents, assistance in recovery of tax claims and measures of conservancy.

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